Smart401K Blog

As investors, we love seeing the markets rally and our account balances increase in value. But when the markets fall, it can really test our mettle. Despite the uncertainty you may feel when a volatile market takes you on a roller-coaster ride, one thing is clear: As investors, we should prepare for the bumpier experience ahead.

Resist the urge to panic and sell all of your shares. Although market movements over the last few weeks may have caused you anxiety, what we’re actually seeing is a return to normal market conditions.

For the past few years, interest rates were kept at near zero, helping to suppress market volatility. As the Federal Reserve brings its bond-buying program, known as quantitative easing, to an end, the market is now turning its attention to the Fed’s timeline for raising rates. Such a transition back to “normal” monetary policy makes it clear that volatility will likely rise, along with investor uncertainty.

Wasting money is easy. Case in point: a start-up company called Washboard launched this summer with a simple enough service aimed at consumers without a washer and dryer at home. Those signing up for Washboard received rolls of quarters (through snail mail) to use when doing laundry.

Let me say that again: They mailed you a roll of quarters so you don’t have to use the change machine at the laundromat, or worse, stop at a bank and get change for a $20 before going to wash your clothes.

Here’s the catch, though: You had to pay $27 to get $20 worth of quarters. Yes, they tried charging $7 for that service. Talk about throwing your money away! Luckily, consumers quickly realized what a waste of money it was, and Washboard shut down less than a month after opening for business.

Shame on you. I know what’s going on. You’ve been trashing your Social Security statement without even a glance or second thought. Or maybe you haven’t begun to consider Social Security’s role in your future retirement. After all, as far as you know, Social Security won’t be around when you retire – that’s what you keep hearing on the news, anyway. So, why bother?

Well, I’ve got news for you. Although the future of Social Security is certainly unknown – particularly for today’s millennials – there’s a good chance the program will persist in some form. And since half of Americans 65 and older rely on Social Security for at least 50 percent of their family income, you’d be wise to come up with a strategy to maximize your benefits and give yourself the highest retirement income possible.

Here are four questions to ask yourself if you want to avoid potentially leaving thousands of dollars on the table:

Do you behave the same way you did 20 years ago? Are your spending habits the same? What about your saving behavior and income?

If the absurdity of those questions made you laugh, you’re like a lot of Americans whose financial habits have evolved over time. The same goes for your retirement years. Although you have probably calculated the value of your nest egg in terms of annual retirement income, what you will be spending immediately after leaving the working world will likely be very different as you move further into retirement.

Whether retirement is decades away or just around the corner, it’s difficult for many retirement investors to determine whether retirement dreams are actually attainable goals. But this is no time to stick your head in the sand because retirement is coming.

Take control and take action. Figure out what dreams could be reachable goals, and create a strategy to make them reality.

The word "retirement" has pleasant connotations. It’s a life phase rooted in the American psyche. Workers look forward to it for years. After 40 or more years of the daily grind of work-life, in retirementwe get to relax and do what we want – be it travel, hobbies or whatever else may move us.

Very few Americans imagine steep medical bills and financial stress when they hear the word – with the possible exception of those who are nearing this life stage and are worried about paying for medical expenses. Yet, whether you realize it or not, medical care can consume a large portion of yourretirement budget.

No one wants to be average, especially when it comes to the kind of retirement they’ll be able to afford. The infographic below compares the size of an average 401(k) investor’s nest egg with that of one who is taking retirement planning to the next level. Being a better-than-average planner could be the difference between having enough money to fund the kind of retirement you want or falling short of your retirement goals.

Your retirement accounts should be working at maximum capacity to move you toward retirement – firing on all cylinders, so to speak.

However, many Americans overlook the need to take a holistic approach and make sure all accounts are working together effectively. Failure to create a holistic, coordinated strategy that includes each retirement account could cause various problems, including:

Do you have custody of your nest egg? A 2013 survey by ING Direct USA showed that half of American adults who participated in an employer-sponsored retirement plan, such as a 401(k), have left an account at a previous employer. These “orphaned” retirement accounts represented more than $1 trillion in investment dollars in 2010.

Leaving an employer is complicated enough, so managing a 401(k) account is likely the last thing on many people’s minds as they make an exit. Consider this: It’s common to move from one employer to the next every two or three years, particularly for people who are newer to the workforce. Someone in their mid-30s could have worked for four or five employers and left behind a 401(k) account each time they moved.